Central Pacific Financial Corp. Reports Third Quarter 2019 Results

HONOLULU, Oct. 23, 2019 /PRNewswire/ -- Central Pacific Financial Corp. CPF (the "Company"), parent company of Central Pacific Bank, today reported net income in the third quarter of 2019 of $14.6 million, or fully diluted earnings per share ("EPS") of $0.51, compared to net income in the third quarter of 2018 of $15.2 million, or EPS of $0.52, and net income in the second quarter of 2019 of $13.5 million, or EPS of $0.47. Net income in the nine months ended September 30, 2019 totaled $44.1 million, or  EPS of $1.53, compared to net income in the nine months ended September 30, 2018 of $43.7 million, or EPS of $1.47.

"We are pleased with our third quarter financial results and look towards building upon the momentum and excitement from both our employees and the community as we continue to execute on our RISE2020 initiative," said Paul Yonamine, Chairman and Chief Executive Officer.

"Our strong quarterly loan growth, solid asset quality and progress on early RISE2020 milestones are reflective of the great work of our employees," said Catherine Ngo, President.

On October 22, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.23 per share on its outstanding common shares. The dividend will be payable on December 16, 2019 to shareholders of record at the close of business on November 29, 2019.

During the third quarter of 2019, the Company repurchased 140,600 shares of common stock, at a total cost of $4.0 million, or an average cost per share of $28.56. During the nine months ended September 30, 2019, the Company repurchased 631,300 shares of common stock, or approximately 2.2% of its common stock outstanding as of December 31, 2018. Total cost of the shares repurchased during the nine months ended September 30, 2019 was $18.0 million, or an average cost per share of $28.46. The Company's remaining repurchase authority under its share repurchase program at September 30, 2019 is $25.9 million. During the nine months ended September 30, 2019, the Company returned $37.2 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights

Net interest income for the third quarter of 2019 was $45.6 million, compared to $43.3 million in the year-ago quarter and $45.4 million in the previous quarter. Net interest margin for the third quarter of 2019 was 3.30%, compared to 3.20% in the year-ago quarter and 3.33% in the previous quarter. The increases in net interest income and net interest margin from the year-ago quarter were primarily due to growth in the loan portfolio, combined with higher yields earned on the loan portfolio compared to the year-ago quarter. These increases were partially offset by lower interest and dividends on investment securities due to the planned runoff of our investment securities portfolio, combined with higher deposit and borrowing costs from the year-ago quarter. The sequential quarter increase in net interest income was primarily due to growth in the loan portfolio, combined with lower deposit costs, partially offset by lower interest and dividends on investment securities. Net interest income in the previous quarter included higher non-recurring interest recoveries of $0.5 million which positively impacted the net interest margin in the previous quarter.

Other operating income for the third quarter of 2019 totaled $10.3 million, compared to $10.8 million in the year-ago quarter and $10.1 million in the previous quarter. The decrease from the year-ago quarter was primarily due to lower income from bank-owned life insurance of $0.4 million, lower income recovered on nonaccrual loans previously charged-off of $0.3 million and lower mortgage banking income of $0.2 million, partially offset by higher merchant and bank card fees of $0.3 million (included in other service charges and fees). The increase from the previous quarter was primarily due to higher merchant and bank card fees of $0.2 million (included in other service charges and fees) and higher mortgage banking income of $0.2 million, partially offset by lower income from bank-owned life insurance of $0.3 million.

Other operating expense for the third quarter of 2019 totaled $34.9 million, which increased from $34.0 million in the year-ago quarter and decreased from $36.1 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $1.6 million and higher legal and professional services of $0.4 million. The higher salaries and employee benefits compared to the year-ago quarter was partially attributable to the addition of positions in strategic areas and higher commissions, combined with annual merit increases effective in the second quarter of 2019. These negative variances were partially offset by lower amortization of core deposit premium of $0.7 million, as the intangible asset was fully amortized as of September 30, 2018, a credit to the reserve for unfunded loan commitments during the current quarter of $0.5 million (included in other) and lower FDIC insurance expense of $0.4 million (included in other). FDIC insurance expense includes a $0.4 million assessment credit received in the current quarter. The decrease from the previous quarter was primarily due to a credit to the reserve for unfunded loan commitments during the current quarter of $0.5 million (included in other), compared to an increase to the reserve for unfunded loan commitments during the previous quarter of $0.5 million. The decrease from the previous quarter was also attributable to lower entertainment and promotions expense of $0.7 million (included in other) and lower FDIC insurance expense of $0.4 million (included in other). Entertainment and promotions expense in the previous quarter included expenses related to a core deposit gathering campaign. Other operating expense in the third quarter of 2019 included approximately $1.2 million in RISE2020-related expenses.

The efficiency ratio for the third quarter of 2019 was 62.48%, compared to 62.84% in the year-ago quarter and 65.09% in the previous quarter. The efficiency ratio in the previous quarter was negatively impacted by the variances in operating expenses noted above.

In the third quarter of 2019, the Company recorded income tax expense of $4.9 million, compared to $5.0 million in the year-ago quarter and $4.4 million in the previous quarter. The effective tax rate for the third quarter of 2019 was 25.2%, compared to 24.7% in the year-ago quarter and 24.6% in the previous quarter.

Balance Sheet Highlights

Total assets at September 30, 2019 of $5.98 billion increased by $248.1 million, or 4.3% from September 30, 2018, and increased by $56.7 million, or 1.0% from June 30, 2019.

Total loans at September 30, 2019 of $4.37 billion increased by $389.8 million, or 9.8%, and $120.7 million, or 2.8% from September 30, 2018 and June 30, 2019, respectively. The year-over-year and sequential quarter increases in total loans were driven by broad-based growth in all loan categories.

Total deposits at September 30, 2019 of $5.04 billion increased by $34.0 million, or 0.7% from September 30, 2018, and increased by $60.8 million, or 1.2% from June 30, 2019.  The sequential quarter increase in total deposits was primarily attributable to increases in noninterest-bearing demand deposits of $48.0 million, savings and money market deposits of $19.9 million and other time deposits greater than $250,000 of $26.7 million, partially offset by a decrease in government time deposits of $22.4 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.16 billion at September 30, 2019.  This represents an increase of $139.6 million, or 3.5% from September 30, 2018, and $57.9 million, or 1.4% from June 30, 2019. The Company's loan-to-deposit ratio was 86.7% at September 30, 2019, compared to 79.5% at September 30, 2018 and 85.3% at June 30, 2019.

Asset Quality

Nonperforming assets at September 30, 2019 totaled $1.4 million, or 0.02% of total assets, compared to $3.0 million, or 0.05% of total assets at September 30, 2018, and $1.3 million, or 0.02% of total assets at June 30, 2019.

Loans delinquent for 90 days or more still accruing interest totaled $0.2 million at September 30, 2019, compared to $0.3 million and $0.3 million at September 30, 2018 and June 30, 2019, respectively.

Net charge-offs in the third quarter of 2019 totaled $1.6 million, compared to net charge-offs of $1.3 million in the year-ago quarter, and net charge-offs of $0.4 million in the previous quarter.

In the third quarter of 2019, the Company recorded a provision for loan and lease losses of $1.5 million, compared to a credit of $0.1 million in the year-ago quarter and a provision of $1.4 million in the previous quarter. The increases in the provision from the year-ago and sequential quarters were primarily due to growth in our loan portfolio. The allowance for loan and lease losses, as a percentage of total loans and leases at September 30, 2019 was 1.10%, compared to 1.18% at September 30, 2018 and 1.14% at June 30, 2019.

Capital

Total shareholders' equity was $525.2 million at September 30, 2019, compared to $478.2 million and $515.7 million at September 30, 2018 and June 30, 2019, respectively.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At September 30, 2019, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 9.5%, 12.6%, 13.7%, and 11.5%, respectively, compared to 9.5%, 12.7%, 13.9%, and 11.6%, respectively, at June 30, 2019.

Conference Call

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.centralpacificbank.com. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through November 23, 2019 by dialing 1-877-344-7529 (passcode: 10136063) and on the Company's website.

About Central Pacific Financial Corp.

Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $6.0 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 78 ATMs in the state of Hawaii, as of September 30, 2019.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

Forward-Looking Statements

This document may contain forward-looking statements concerning projections of revenues, income/loss, earnings/loss per share, capital expenditures, dividends, capital structure, or other financial items, plans and objectives of management for future operations, future economic performance including anticipated performance results from our RISE2020 initiative, or any of the assumptions underlying or relating to any of the foregoing.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and may include the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "hopes," "targeting," "should," "estimates," or words of similar meaning.  While the Company believes that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect.  Accordingly, actual results could materially differ from projections for a variety of reasons, including, but not limited to:  the effect of, and our failure to comply with any regulatory orders or actions we are or may become subject to; oversupply of inventory and adverse conditions in the Hawaii and California real estate markets and any weakness in the construction industry;  adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates,  deterioration in asset quality, and losses in our loan portfolio; our ability to successfully implement our RISE2020 initiative; current and projected levels of RISE2020-related expense, which include estimates of expense related to dedicated staff and management time and third-party expense; the impact of local, national, and international economies and events (including political events, acts of war or terrorism, natural disasters such as wildfires, volcanoes, tsunamis and earthquakes) on the Company's business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in economic conditions, including destabilizing factors in the financial industry and deterioration of the real estate market, as well as the impact from any declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular;  the impact of regulatory action on the Company and Central Pacific Bank and legislation affecting the financial services industry; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, other regulatory reform, and any related rules and regulations on our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, and the results of regulatory examinations or reviews;  the effects of the Tax Cuts and Jobs Act; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, securities market and monetary fluctuations;  negative trends in our market capitalization and adverse changes in the price of the Company's common shares; changes in consumer spending, borrowings and savings habits; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers, including fintech businesses; the effect of changes in accounting policies and practices, including changes as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; changes in our capital position; our ability to attract and retain skilled directors, executives and employees; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in any of the foregoing items. For further information on factors that could cause actual results to materially differ from projections, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. The Company does not update any of its forward-looking statements except as required by law.

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Central Pacific Financial Corp.